The Permanent Portfolio, Investing, Finance and Random Thoughts.
Archive for November, 2009
Tax Loss Harvesting
2 years ago
by Craig Rowland
in Investing
Seems I raised a few questions from my previous post where I mentioned tax loss harvesting. This information only applies to taxable investors. Tax-deferred investors can ignore this post.
You can also read about tax loss harvesting here:
http://www.bogleheads.org/wiki/Tax_Loss_Harvesting
The basic idea is you sell off your losing asset to capture the losses and apply those losses against other gains and your annual income. You then buy back into the asset in a couple various ways to build your position back again to where it should be. This allows you to bank those losses as a credit that can lower your tax bill. It is easier than it sounds and can save you big bucks. If you have losses in your taxable investments and don’t understand this, talk to a CPA. It may pay for itself many times over.
Usually you can’t do much tax loss harvesting after the first few years because most assets will have developed too much in gains so there are no losses. But with the markets so volatile the last year or so this option has become more available to investors. You can use tax loss harvesting with stocks, bonds, gold and other assets that show a loss (check with your CPA for your situation). The IRS requires you to wait 31 days before buying the same asset again to avoid a “wash sale” (which would negate the ability to write off the losses) but this is easy to work around.
Investment Clown: Doing Something…
2 years ago
by Craig Rowland
in Investing
I see big fun potential with this application:
The Home Stretch…
2 years ago
by Craig Rowland
in Investing
In January of last year I asked what people thought would perform the best of the four Permanent Portfolio Assets (Stocks, Bonds, Cash or Gold). While I tossed my hat into the stocks camp (which have recovered sharply since last year), the gold bulls seem to be winning. Here’s the breakdown according to Morningstar using a standard ETF version of the Permanent Portfolio for ease of performance tracking:
SPDR Gold Shares (Ticker: GLD): +30.54
Vanguard Total Stock Market (Ticker: VTI): +25.44%
iShares Short Treasury Bond Fund (Ticker: SHV): +0.20%
iShares Barclays 20+ Year Long Term Treasury Bond Fund (Ticker: TLT): -17.76%
YTD Morningstar Total Returns (capital gains, interest and dividends): +13.21%
Gold has been able to beat stocks so far this year. I was pretty sure that stocks would rebound strongly but didn’t expect gold to still do so well. We still have a month to go, but looks like the gold bulls may be buying the champagne come New Year’s Eve.
Long term bonds took a beating so far, but usually it is the case that one or more assets in the portfolio may be doing poorly while one or more may be doing well. Normally what happens are the gains from the winners can offset the losses from the loser. Not always, but mostly. So even though LT bonds are down almost 20%, the stocks and gold have provided more than enough power to grow the portfolio in total. And of course that’s what really matters. Don’t look at assets in isolation, look at how they work together in the total portfolio value.
Right now is also a good time to remind taxable investors to start planning for end of year rebalancing sales to capture losses (such as the Long Term Bonds), to take gains to offset against losses, etc. If this is confusing to you, talk to an accountant for some advice as smart tax loss harvesting can significantly reduce your tax bill.
Happy Thanksgiving…
